Credit Connect

The Financial Conduct Authority (FCA) has published its ‘FCA Mission – Our Future Approach to Consumers’. When the FCA launched its mission, it committed to publishing a series of documents that would explain its approach to regulation in more depth. The FCA’s Approach to Consumers is the first in this series, and explores the approach to regulating for consumers.

The FCA has opened a consultation on its Approach document to ensure that the proposed approach will truly help meet the needs of consumers. The consultation will close on 5 February 2018 and we will publish the final Approach to Consumers in 2018.

The FCA wants to see markets where:

High-quality, good value products and services that meet consumers’ needs are available.

Consumers can buy the products and services they need and the way in which they are sold is clear, fair and not misleading.

The needs of vulnerable consumers are taken into account.

The Approach is based around the following core ideas:

Firm and consumer responsibility

Our starting point is for firms to treat customers fairly. The financial products and services consumers need should be available, marketed and sold in a way that allows them to make informed choices. However, we also expect consumers to take reasonable responsibility for the decisions they make about the financial products and services they buy. We know some people face challenges which mean they may not make the best decision for their particular needs. Firms must not exploit these customers and should exercise extra care where consumers may be vulnerable.

Regulating for vulnerable consumers

Consumers in vulnerable circumstances may be significantly less able to represent their own interests than the average consumer, and more likely to suffer harm. Any consumer can become vulnerable at any time in their life, for example through serious illness, bereavement or loss of income. The FCA expects firms to pay attention to possible indicators of vulnerability and have policies in place to deal with consumers where those indicators suggest they may be at greater risk of harm.

Keeping pace with a changing environment

Changes such as new technologies are having an impact on how both firms and consumers make decisions. The FCA therefore approaches regulation taking into account the different needs of consumers based on their circumstances whilst providing as much certainty as possible to firms. The FCA will use behavioural economics and Data Sciences to ensure our Approach to regulation is fit for today and the future.

Having regard to access and tackling exclusion

Some consumers can find that they are inadvertently excluded from participating in financial services due to their specific characteristics or circumstances. The FCA will seek to develop practical strategies to tackle access problems, working with firms and stakeholders to do so. This will include the FCA looking at our own rules, but also ensuring they are being interpreted correctly.

Delivering better outcomes for all consumers

Delivering good outcomes for vulnerable and excluded consumers requires co-operation between firms, consumers and the FCA.

Andrew Bailey, FCA Chief Executive, said: “Our Mission explained that we act where we can add the greatest public value and have the greatest impact. Today’s paper focuses on how we can deliver better consumer outcomes through our interventions and tackle the areas of greatest harm. There are limits to what we can achieve on our own. We will work with others – industry, Government and other agencies – to address complex issues like vulnerability and financial exclusion.”

Commenting on the release, Joanna Elson OBE, chief executive of the Money Advice Trust, the charity that runs National Debtline, said “It is positive to see that the issue of vulnerability remains a high priority for the FCA. In particular, we look forward to working with the regulator as it consults on its new definition of vulnerability, which we must make absolutely sure covers the full range of circumstances that can affect people. The definition must also place the right level of emphasis on the responsibility of firms to deliver the right interventions in identifying and supporting these customers. Despite significant progress from the industry in response to the Financial Services Vulnerability Taskforce, there remains more work to do.

“On financial inclusion more generally, while we recognise that there are limits to what the FCA can do, we would like to see the regulator pro-actively share concerns, evidence and options with government, through a new formal mechanism, into order to inform wider public policy. We hope the government’s forthcoming response to the House of Lords Financial Exclusion Committee will address some these key challenges.

“Finally, we would welcome greater clarity on how the regulator will police its so-called regulatory perimeter, in areas such as lead generation, where we believe there is significant consumer detriment being caused.”